The Learning Curve by Muckdog

2010 Thoughts

2010-01-03T12:26:00.001-08:00

Heading into 2010, I believe there are a few things to keep an eye on. We’re still early in the economic recovery, so I expect an upside bias to the stock market. But history shows that mid-term election years tend to see a market correction followed by a big rally. Wage growth will still be tough. I think state and local governments will be surprised on the upside by 2009 tax returns come the April filing, and that will relieve some of their deficit issues. But states are still dealing with high unemployment. I expect unemployment to creep down as companies begin to hire folks in anticipation of steadier growth ahead.

I think the economic recover will be slow but steady. So I’m looking for a return in the SP500 of about 10%. Not going out far on the limb.

As for my portfolio, I remain 100% long but will watch closely for the mid-term correction to lighten up in anticipation of more attractive prices and a rally into year-end.

2009 Gurus in Review

2010-01-02T23:17:00.000-08:00

Lets review the Fox Business Block stock pickers' picks for 2009. Here I listed them back on January 2, 2009 and now with their results.

Bulls and Bears
Gary B. Smith: Fannie Mae (FNM: $.76 to $1.18)
Tobin Smith: Quanta Services, Inc. (PWR: $19.80 to $20.84)
Pat Dorsey: WellPoint (WLP: $42.13 to $58.29)
Eric Bolling: Google (GOOG: $307.65 to $619.98)

Cavuto
Patricia Powell: 3M Co. (MMM: $57.54 to $82.67)
Charles Payne: Apple (AAPL: $85.35 to $619.98)
Adam Lashinsky: Walgreen (WAG: $24.67 to $36.72)
Matt McCall: iShares High Yield Corporate Bonds (HYG: $76.01 to $87.84 - not including dividends)
Forbes on Fox
Evelyn Rusli: URS Corp (URS: $40.77 to $44.52)
Jack Gage: Energizer (ENR:$54.14 to $61.28)
John Rutledge: Apple (AAPL: $85.35 to $210.73)
Victoria Barret: salesforce.com (CRM: $32.01 to $73.77)
Cashin' In
Jonathan Hoenig: Tokyo Stock Exchange REIT Index (JRE: $21.70 to $18.80)
Wayne Rogers: Abraxis Bioscience (ABII: $65.92 to $40.55)
Jonas Max Ferris: WADDELL AND REED FINANCIAL (WDR: $15.46 to $30.54)

Nothing really surprises me about these picks and results. 2009 was a fantastic year. There were a few clunkers in there, but overall the winners did very well. I guess we avoid Hoenig's and Roger's picks from Cashin' In, eh?

Oh, and what did I predict?

My prediction? I think that the policy of the Fed and stimulus spending from the Obama administration will lead to a rebound in the economy later this year or in 2010. But that will start to show up in stocks in 2009, as the market starts to discount the future. I think it's possible that we retest the 2008 lows once again, but that a new bull market will begin. The first year gains from the bull market will be substantial, so I'm predicting a 20% rise in the SP500 in 2009.

Blindfolded monkeys throwing darts at squirrels in the forest and all.

Coming up... 2010 predictions! But that's for tomorrow as I watch football. I am in three leagues, and made it to the championship in two of them. I think because of the coaches benching players, one league is lost. The other is more in play. But overall, I'm not sure why I'm in leagues that play their championships in week 17. This has happened more than once where teams are scrambling for garbage players to replace the studs that got them to the championship game.

2009 Performance

2010-01-02T22:56:00.000-08:00

Reviewing my 2009 stock return and it was a great year for the markets and for me. As they say, a monkey throwing darts at a stock page will do well in a bull market, but I was able to beat the SP500 by a decent percentage. In 2009 the SP500 returned 23.5%. I was up 40.7%. The goal is to have this kind of return against the index every year. Most investors fail to beat the market over the long term, and most investment strategies fail to beat the market.

The headlines say that from 2000-2009, investors did poorly. But here is a great column from the NY Times that suggests otherwise.

For Savers, It was Hardly a Lost Decade

If you invested $100,000 on Jan. 1, 2000, in the Vanguard index fund that tracks the Standard & Poor’s 500, you would have ended up with $89,072 by mid-December of 2009. Adjust that for inflation by putting it in January 2000 dollars and you’re left with $69,114.

But that is not how most real people invest. They don’t pour everything they have into just one type of asset and then add nothing to it for 10 years. Instead, they buy stocks of all sorts, and bonds and perhaps other things, too. And many millions of them dutifully add more money regularly, usually into a retirement account that they won’t touch for longer than a decade.

For those people, it was not a lost decade at all. Even those who started with a low six-figure balance could have doubled their total savings in the last 10 years.

How?

Well! I left a cliffhanger! But the answer is diversification and steady dollar-cost investing month after month. Read the link and realize that nobody every invested all their money at the exact top or exact bottom. It's a long journey that requires dedication, patience, and sometimes, looking the other way.

Happy New Year! And Rush Limbaugh!

2009-12-31T10:15:00.000-08:00

Thank you all for coming here and reading my rantings over the years. I know it's slowed down a bit in 2009 as I have been a slaving work monkey, but I will press on.

I'm not much one for New Year's resolutions. But if there is one I would press on all of us, it would be to be safe and healthy. We heard late last night that Rush Limbaugh (never pictured) was in the hospital with chest pains. Over the years, Rush has hit the headlines with alleged drug addictions, trips to foreign countries for alleged visits to prostitutes, allegedly being overweight, and smoking cigars (alleged). He also has a job that involves arguing all day long. Seems like a stressful occupation to me.

I don't think it is society's business to tell Rush how to live his life, but the consequences of his choices over the years seem to have caught up with him. We are all a product of our own choices. Every step we take and every decision we make has consequences. That's the kind of message Rush Limbaugh delivers everyday on his radio program. He now becomes an example for the rest of us to take note of.

Be safe. Be healthy. Make good decisions.

Have a wonderful New Year!

Predictions for the Next Decade

2009-12-29T11:11:00.000-08:00

One thing about predictions is that it's easiest to predict the status quo. In otherwords, the way things are now will continue indefinitely. Like this: Link

So what does it say? Low stock returns, low interest rates, and high unemployment.

It makes sense, but consider the rosy optimism of January 1st, 2000.

My Favorite 2009 Cartoon

2009-12-28T21:33:00.001-08:00

Lots of cartoons in 2009, but this on Obama's Nobel Prize was a dandy!

The Dow 1999-2009 Adjusted For Inflation

2009-12-27T18:50:00.001-08:00

Looking at the stock market in 1999 dollars. Yikes!

The Dow today stands at 10520.10, but in 1999 dollars, the benchmark index is only at 8140.38. Some analysts say looking at stocks without adjusting for inflation gives investors an exaggerated view of performance over time.

Link

The common wisdom is to "build wealth slowly over the long term." Still wise words, along with "patience is a virtue."

Newspaper Subscription Websites

2009-12-27T18:29:00.001-08:00

With a new year coming in less than a week, media sites are looking at adding fees for visitors.

Ads alone are proving inadequate, and in the next several weeks, some publications are expected to take the plunge by erecting pay walls.

Link

The Internet is one of the last free markets out there. People who want to pay for websites certainly can, but many more will gravitate to free content.

Have at it, folks. I wish you the best of luck. But I think people will quickly delete your links from their bookmarks if you try to charge a fee.

Christmas Eve Thoughts and Randomosity

2009-12-24T11:57:00.000-08:00

Santa Claus puts massive bid under market to help the market close at the highs in today's shortened session. (I just wanted to write the headlines, instead of reading about consumer optimism, short-covering, technical buying, etc.
For those of you who don't believe in Santa Claus, maybe it was some of those other things. But as for me, Virginia, I believe.
Merry Christmas to you and yours. Enjoy the season and the company of friends and family.
Some Christmas Eve randomosity....

SP500 bottoms vs. recessions. Typically, the markets bottom 3, 4 or 5 months in advance of the recession’s end. However, it has been as much as 7 months (1954) and in 2001, the market did not bottom until 12 months after the recession’s end.
But wait, Paul Krugman says we're not out of this by a long shot. So what about our current situation? It’s just like the two previous “postmodern” recessions, only more so, since the bubble before the slump was in housing itself. This suggests a long period of jobless growth; so does the international evidence on the aftermath of financial crises.
Some TV channels having Christmas marathons! You know, A Christmas Story, Christmas Vacation, etc.
Christmas Eve, and the Senate is loading up the health care sleigh with goodies! Senate OKs health care bill.
Fasten your seatbelts, because it's going to be a bumpy tax ride. I think we all realize that the government only spends more money, and with national health care coming, the government will need more money. Yes, your taxes will go up. It may come directly, it may come indirectly as companies pass on their tax hikes to you. But, you will pay more.
The Meaning of Blogging from DJ at Wizbang. For me, it's a diversion from the day to day, and a way to meet other folks around the globe. I do enjoy the emails and comments. I also spend time on Twitter.

Wednesday Randomosity

2009-12-23T15:20:00.000-08:00

I'm 100% long the stock market and see no reason to do anything different through year-end. We're seeing nice ramp-ups into the end of the year in the sectors that have done well in 2009. Sweet. Of course, January 4th could see some shifting, but that's not today's business.
Wow, California lost almost 100,000 residents in 2009. But they call that an improvement, as over 300,000 left in 2006. They say folks are staying because they can't unload their homes. Heck, with the no foreclosure rule, some have figured out that they can stay in their homes without making any payments! But, net-net, folks are still leaving. Just look at this Google search.
I mentioned in November that I was re-watching Lost. I'm a few episodes in to season 5 and they're all back on the island! It's been really fun to go through the series again. Thank goodness for online streaming to the family room TV via the Netflix Roku box.
I roll my eyes about activists concerned about global warming. Today we learn that it's not CO2 causing global warming, but CFCs and cosmic rays. Hey, and it's peer-reviewed! In my eyes, the gist of it all is that science marches on outside of politics. When Al Gore said that the science was settled, every alarm bell in an open mind should've gone off.
Not Penny's Boat.
Does Amazon buying Netflix make sense? Maybe. Can Netflix survive all by itself as other content providers (cable companies, sat dishes, Apple, etc) make it easy to get online video to TV? Maybe it is in Netflix's best interest to align or be bought by Amazon. Or Apple. Or Microsoft. Or somebody.
On the Roku box I mentioned above, Roku has expanded their online offerings for streaming Amazon movies, MLB.com, and other web videos. I still just stream Netflix content at this time. Maybe that's where all my free time is going these days. LOL.
So, how you doing?

The US Dollar and Foreign Stocks

2009-12-15T13:22:00.001-08:00

Just thinking out loud, but if we (the US) are heading into a stronger economy an rising interest rates, the US dollar will rise. My thought here is that mutual funds and ETFs that invest in foreign companies and have assets denominated in foreign currencies have seen share price appreciation due to the declining dollar. What happens if that trend reverses?

Chasing High Dividend Stocks

2009-12-11T22:25:00.001-08:00

Interesting perspective from the WSJ on chasing dividend paying stocks in this low inflation environment.

With the income from bonds withering away, investors are piling into dividend-paying stocks. Investors should be cautious.

...

Don't forget that even today's 2% to 4% bond yields aren't as paltry as they look, because inflation remains close to zero. The 6% interest income you remember earning a decade ago came at a time when inflation ran about 3%. You might protest that inflation, as officially measured, is understated today—but it is probably no more inaccurate now than it used to be. In real terms, you are only slightly worse off now than you were then.

Link

What is a Santa Claus Rally?

2009-12-11T22:08:00.001-08:00

A good column on what exactly is the Santa Claus rally. Many definitions, but the historically most accurate is that the week between Christmas and New Years tends to be bullish. From Mark Hulbert.

I remain long the market and short on time. Work is crazy but I see some less stress after next week.

Microsoft 7 Bugsapalooza

2009-12-09T12:16:00.001-08:00

Nobody should ne surprised that Microsoft $MSFT is dealing with software bugs and issues.

Microsoft launched Windows 7 in late October to much fanfare. But, just like with previous Windows upgrades, complaints about bugs have already started rolling in.

Link

As a software developer, this is the nature of the beast.

More important to the industry and us as investors is that Windows 7 is a strong product and will lead to PC purchases. For example, I'm about to order a new Dell. Same with many friends and coworkers. I don't think we are alone.

Yes, there are bugs and there will be bug fixes. What's new?

The Economic Recovery

2009-12-06T10:07:00.000-08:00

About 9 months after the atock market bottomed and put on a tremendous rally, we are now seeing employment numbers improve. I believe the numbers will continue to improve into 2010.

I think the remaining stimulus money should not be squandered. With our growing deficit and the economic recovery gaining traction, any excess money should be used to reduce the deficit.

I remain 100% invested.

Taxing Stock Trades

2009-12-02T17:17:00.001-08:00

The latest brain freeze out of our government is a tax on stock trades.

A growing chorus of Democratic lawmakers and liberal economists are pushing hard for a tax on stock trades to pay for job creation.

By levying a small fee when stocks, futures, swaps, options and other securities are bought and sold, supporters of the tax believe the government can take in between $120 billion and $240 billion annually. That money could be used to fund additional government stimulus to help put the nearly 16 million unemployed Americans to work.

Link

The big issue I see with this is a decline trading volume. That is up to $240 billion out of people's pockets. It could reduce liquidity in the markets It's a very bad idea.

Innate Male Behavior

2009-12-02T08:59:00.001-08:00

Agree with Tobin Smith.

Rationalization? Sure. It does happen a lot.

Sunday Randomosity

2009-11-29T22:59:00.001-08:00

Well, it will be interesting to see if the market bounces back tomorrow. We are hitting the end of the month and beginning of December, which could see the monthly dollar-cost averaged cash enter the market. Or not. I hope we bounce back from friday.
I ordered vegetable udon at a Japanese restaurant tonight. It was a bowl of noodles with just a few sprigs of brocoli and a few carrots, very finely shredded. $9. The broth was okay, but come on $9? The free bowl of miso soup with a few tofu cubes was more hearty.
As I lamented on Twitter, I am playing the last-placed team in 2 fantasy football leagues. They have the highest scores in their respective leagues this week. Me? Second highest score. In both leagues. Good grief.
Almost done with re-watching season two of Lost. Michael jsu came back and shot Anna Lucia and Libby, while Eko and John found the monitoring hatch under the drug running plane.
RSS Player is back in the iPhone app store. Improved version. Crashes here and there but pretty good. During the time it was unavailable I used Drivecast. Will continue to use both. Drivecasts fast forward is broken in current version but dude says next version submitted to apple.

The Dubai Delay

2009-11-26T21:59:00.001-08:00

Well, the historical pattern where the market does well on the day after Thanksgiving could be toast.

Nov. 27 (Bloomberg) -- Treasuries rose the most in almost two weeks after a Dubai proposal to delay debt payments set off a slide in stocks and higher-yielding assets worldwide.

Link

The credit crunch continues.

Happy Thanksgiving

2009-11-26T11:44:00.001-08:00

I want to wish all of you who read this blog a very happy Thanksgiving. I appreciate the comments and emails.

Interest on the National Debt

2009-11-25T13:57:00.000-08:00

I was catching up on some podcasts this morning on the drive in, and listened to Bob Brinker's (not pictured) Sunday show. He mentioned that with a $12 trillion national debt, if the prime rate was to go to 5%, we'd be paying $600 billion a year in interest. That's interest only.

Should interest rates rise. No worry of that, right?

Well...

Picture is of *the other* market timing radio pop star, Gwen Stefani. After all, Brinker ain't no hollaback girl.

Thawing Turkey and Sea Lion Randomosity

2009-11-23T14:34:00.000-08:00

It's Monday. It's Thanksgiving week. One of my favorite weeks of the year! It seems as if the market also is pricing in a nice turkey dinner with all the trimmings and fixings. Market went up about 1.2% across the board.
Of course, thawing turkeys are being denied the credit for today's ramp. We have headlines of the day about a weak dollar and better than expected home data getting credit for buyers being over-the-top excited about stocks today.
Have you seen the recent flap about global warming data being faked? It doesn't really surprise me, human behavior being what it is. But you wonder how deep this rabbit hole goes, Neo.
Have you bought your Hide the Decline t-shirt?
LOL, Weird Al Yankovic. Ah, I think I like his versions of songs better than the originals. At least when I try to remember lyrics, I'm singing the Weird Al versions. Really.
Is it just me, or is the WSJ website a real computer resource hog? Good grief.
Did you read about the guy in Sacramento who was arrested for shooting a sea lion? Foy said that, upon questioning, Legans admitted shooting the sea lion with a 12-gauge shotgun on Nov. 11 while fishing from his boat in the Sacramento River near Verona. A shotgun allegedly used in the crime was confiscated from the home as evidence. "He said he was tired of sea lions taking his fish," said Foy. Sea lions are a protected animal.

TGIF Randomosity!

2009-11-20T14:10:00.001-08:00

As I sat down this morning to blog, the market was tanking, er getting smoked, yet again. But work intervened and when I came back to my office, things weren’t so bad. Obviously, the market got hit with the Dell news (as did Dell!). The WSJ said investors wanted safety today.
Hat tip to Market Power (twice) for the link to the College Athletic Graduation Data. Kind of interesting, and good to know that rates are on the rise.
Everyone is rolling their eyes when they hear that employment lags in this economic recover. Mark Thoma explains why it may be until 2013 that we see employment recovering. Oh, and there are graphs. I like graphs.
Eyes on health care this weekend!

Sixty votes in the 100-seat Senate are required to clear Saturday's vote, meaning that all 58 Senate Democrats and the two independents that generally vote with them will need to hold together. All 40 Republicans are united in opposition.

"We are not assuming a thing. We are working hard to bring all Democrats together for the 60 votes necessary to proceed to this historic debate," said Dick Durbin of Illinois, the No. 2 Senate Democrat. "I'm hoping that we can muster our ranks."

So, I have Dwayne Bowe on my fantasy football team. Good grief, he’s suspended for 4 games. So I’m going through the free agent list and looking at picking up some other cast off.
I don’t really have an opinion on Sarah Palin’s new book. Sorry. I don’t think I’ll read it. There are many blogs out there commenting on the book. I wonder how many have actually read it, compared to how many love or hate Palin, and are just reciting talking points?

Dude, I Hope You Didn’t Own Dell

2009-11-19T22:46:00.001-08:00

Dell reported that their fiscal third-quarter profit fell 54%.

Officials offered less than robust outlook on end demand. Chief Financial Officer Brian Gladden said demand had stabilized but a significant uptick was unlikely until 2010. Dell’s shares are down about 6% in after-market trading.
In the post-earnings conference call, officials said desktop PC revenue declined 26% year-over-year. Mobility fell 14%, servers down 6%, storage down 19%, according to our colleagues over at Digits.
Link

You know, this is sad news for the 3rd quarter and all, but I’m guessing that 4th quarter demand (and forward) may increase with people upgrading PCs and moving to Windows 7. I’m speaking for myself, as I am planning on a new purchase in the next few weeks. In addition, friends and family are also in the market now that Windows 7 is out. I’m guessing Dell will get most of our business. Just saying.
But bad news in the rear-view mirror, that’s for sure.
Is the 26% year-over-year decline in desktop revenue really that shocking? I can’t think of anyone buying right before the Windows 7 release. Even with a free upgrade to Windows 7, it’s much easier to just buy a PC with the operating system already installed.

DOW Theory Buy (Recently)

2009-11-18T22:32:00.001-08:00

In case you missed it, the DOW Theory buy hit last Monday.

As Mark Hulbert (not pictured) reports, the action on the Dow Transports last Monday finally triggered a Dow Theory buy signal, which has been enough to persuade some erstwhile bears to grudgingly turn bullish. Of course, Hulbert notes that there may nevertheless be some Dow Theorists who remain dismissive of this buy signal due to the lack of any extended correction since the market's March low.
…
Richard Russell (not pictured, either), editor of Dow Theory Letters, is one of the technical analysts who, in light of the joint new highs of both the Dow Industrials and the Dow Transports, are now officially bullish on both the secondary and primary trends of the stock market.

There you go. Good to know, I suppose.
But heck, Gary Kaltbaum was talking about “momentum tops” on his radio show today. Of course, he was hedging this way and that way and being rather unspecific with regards to making any sort of market call. As usual. But he does have an entertaining radio show.
I remain 100% long.
Pictured is Monica Raymund, from Lie to Me.